COURT FILE NO.: CV-19-077
DATE: 20210617
SUPERIOR COURT OF JUSTICE
B E T W E E N:
2280092 ONTARIO INC.
Plaintiff
- and -
ROBERT COLLINS
HAILIN COLLINS
MERIDIAN CREDIT UNION LIMITED
CLAUDE HEROUX
GIANCARLA HEROUX
2280092 ONTARIO INC.
PCH HOMES AND C.C. GREEN HOMES
Defendants
R E A S O N S F O R D E C I S I O N
BY THE HONOURABLE JUSTICE P. ROGER
on June 9, 2021, at OTTAWA, Ontario
APPEARANCES:
S. Black
Counsel for the Plaintiff
R. Ruddock
Counsel for the Respondents
WEDNESDAY, JUNE 9, 2021
Roger, J. (Orally):
R E A S O N S F O R D E C I S I O N
Leave
Leave to bring these motions is not disputed by either party. Interlocutory steps, other than those provided or allowed under the Construction Act, are not to be taken without the consent of the court, on proof that the steps are necessary or would expedite the resolution of the issues in dispute.
Here, the above is not disputed and I agree. Consequently, leave or consent of the court is granted to bring this motion and this cross-motion.
Validity of the Lien
I find that the lien rights expired before registration for the following reasons.
A motion under s. 47(1) of the Construction Act to seek to discharge a lien or to vacate the registration is similar to a motion for summary judgment. In that regard, the defendants have met their onus, or their evidentiary burden if you wish, of demonstrating that there are no genuine issues requiring a trial with regards to the resolution of that issue. The plaintiff’s evidence on that issue similarly does not raise a genuine issue requiring a trial.
I arrive at that result without using the fact-finding powers provided at Rules 20.04(2.1) and (2.2) of the Rules of Civil Procedure. The evidence presented on this motion allows me to fairly and justly decide that issue in a more timely, affordable, and proportionate procedure, and a trial is therefore not required to resolve that issue.
Section 32(1)(b) is applicable, this is not disputed. Section 32(1)(b) of the Construction Act provides that the lien expires at the conclusion of the 60-day period next following the earlier of the date the contract is completed and the date the contract is abandoned or terminated. When the contract was abandoned is the issue in this matter.
Whether or not a contractor abandons a construction contract is a question of fact. A cessation, or a stoppage of work if you wish, and an intention to abandon the contract must be shown. A cessation or stoppage of work alone is not sufficient.
The evidence establishes that the contract was abandoned before May 28, 2020. As a result, the registration of the lien is invalid.
The evidence of the plaintiff, at its best, does not establish a genuine issue requiring a trial regarding the supply of services to the improvement for purposes of the Construction Act at any time from May 28, 2020 onward. More than minimal cleaning or minimal repairs are required, and from the evidence presented by the plaintiff, nothing sufficient occurred from May 28, 2020, onward. The evidence as a whole establishes, at best, that tools and minor items were delivered, were collected from the project, nothing that could constitute the supply of services under the Construction Act. As well, the defendant’s evidence establishes that the supply of services last occurred prior to May 28, 2020. In fact, probably no sufficient services occurred after May 21, 2020.
The above was not really disputed by the plaintiff, who focused its arguments more on the intention to abandon the contract. On the topic of intention, the evidence indicates that:
On May 12, 2020, the plaintiff’s lawyer, which was a different lawyer at the time, sent a letter to the lawyer for the defendants, also a different lawyer, claiming an overdue amount exceeding $68,000, and stating that without payment and a schedule for further payments, the plaintiff would not complete the project;
Shortly thereafter, the plaintiff removed their tools from the project;
From that time onward, the plaintiff did not provide services other than minor cleaning or bringing or removing minor items from the property, nothing that could constitute sufficient services under the Construction Act;
The defendants removed the plaintiff’s sign on their property at some time prior to May 20, 2020, and Mr. Collins stated in his affidavit that this was because they, the defendants, were certain the plaintiff would not return unless the defendants gave in to the plaintiff’s demands, which Mr. Collins swore in his affidavit the defendants had no intention of ever doing, as the defendants considered — and this was an issue that is in dispute — then and now that they had significantly overpaid on the contract and were unsatisfied with the non-completion of the contract, which was then about six months overdue, and were unsatisfied with the alleged deficiencies in the work performed to that date by the plaintiff;
By early June 2020, despite the ongoing pandemic, the defendants had somehow hired another contractor to complete some of the work required to be done by the plaintiff. Clearly, the defendants had come to some sort of conclusion prior to early June in order to do so;
The last invoice that the defendants received from the plaintiff is dated February 21, 2020;
Mr. Burton, who was apparently on site on June 2, 2020, for the plaintiff, did not provide any evidence, however, and in any event, the plaintiff’s description of what was done by Mr. Burton at that time does not constitute sufficient services and is limited to minor cleaning.
The evidence of the defendants establishes that they did not wish to continue with the services of the plaintiff since at least May 28, 2020. The clear evidence of Mr. Collins on this point dispels the plaintiff’s arguments of a genuine issue requiring a trial related to text messages from the defendants of June 4 and June 15, 2020. When I consider these messages from the defendants in the context of all the evidence, and particularly the evidence of Mr. Collins, these messages do not raise a genuine issue requiring a trial of the parties’ intention, because their intention by then was obvious, and is obvious from the facts stated above.
The plaintiff did not intend to continue with the contract unless payment arrangements were made, and the defendants did not intend to make any such payment arrangements. As a result, even if the language that was used by the plaintiff’s lawyers at the time was not crystal clear, that letter nonetheless confirmed that the plaintiff’s intention was of conducting no more work on this project until payment arrangements were made.
Similarly, the contractor’s correspondence of May 20, 2020, does not raise a genuine issue requiring a trial when it is considered in the context of all the evidence, particularly in the context of the letter from the plaintiff’s lawyer referred to above and dated May 12, 2020. As indicated above, although that letter of May 12, that the contractor wants to complete the project, like the correspondence of May 20, 2020, which also indicates that the contractor wishes to complete the project, the letter of May 12 specifically makes that wish of wanting to complete the project conditional on the defendants agreeing to paying the amounts allegedly owing of over $68,000 and agreeing to a schedule for further payments, none of which the defendants were prepared to do, according to the clear evidence of Mr. Collins on that point. The defendants’ subsequent termination letter only recognizes the earlier abandonment of the contract. These facts distinguish this case from the cases relied upon by the plaintiff on this point. As a result, there is no issue requiring a trial that the contract was abandoned sometime before May 28, 2020.
Other Arguments of the Defence
Whether the plaintiff is the proper lien claimant, whether any amount has been demonstrated as owing to the plaintiff as required under the Construction Act and whether this action should be dismissed on other grounds were not pursued by the defendants when this motion was argued. The defendants indicated that they were not pursuing such relief at this time. As a result, these points were not argued, and I will obviously not decide them.
That leaves the issue of the defendant’s motion of security for costs.
Security for Costs
Rule 56 is applicable.
The defendants have established that the plaintiff is a corporation, and that there is good reason to believe that the plaintiff has insufficient assets in Ontario to pay the costs of the defendants relating to the main action. In fact, the evidence of the plaintiff also supports the fact that the plaintiff does not have sufficient assets, as the plaintiff alleges that it is impecunious.
However, a corporate plaintiff who claims impecuniosity must demonstrate that it cannot raise security for costs from its shareholders and associates. This requires substantial evidence about the personal means and abilities of its shareholders and others who have or might have an interest in the litigation to post security. Bare assertions are not sufficient. Otherwise, shareholders and others with an interest in the action would be able to take the benefits of an action without being exposed to the consequences of an unsuccessful action.
It is undisputed that the home in which the shareholder of the plaintiff resides is owned by his wife. It is also undisputed that there is about $199,000 of equity in that home. On the other hand, it is hotly disputed by the defendants when the wife of the plaintiff’s shareholder or principal stopped being a shareholder and director of the plaintiff. As well, also on the other hand, it is not disputed that the wife of the plaintiff’s principal played a role in the plaintiff’s business as some of the plaintiff’s expenses on the project were paid by the wife’s credit card. She therefore is a person with an interest in the outcome of this litigation, yet we know little of her financial situation, and she did not file an affidavit in that regard.
Consequently, the plaintiff has not established that it is impecunious. It is therefore not necessary to embark on an analysis of whether the main action is not clearly devoid of merit, or on an analysis of why it might be unjust to order security for costs because impecuniosity of the plaintiff has not been established.
The amount sought as security for costs by the defendants was not challenged in the plaintiff’s factum or when the motion was argued. The defendants’ draft bill of costs is reasonable. After removing the items relating to the motions that were argued, the defendants anticipated costs for the main action, and only for the main action, come up to just slightly less than $30,000 on a partial indemnity basis. I will allow $27,500 as a reasonable amount of security for the costs of the main action.
This brings us to the plaintiff’s cross motion.
CROSS MOTION
Business Names Act
At paragraph 7 of their defence, the defendants allege that this action is a nullity because the plaintiff carried on business with the defendants under other business names without registration of these names under the Business Names Act. Indeed, s. 7 of the Business Names Act provides that a corporation carrying on business under an unregistered business name is not capable of maintaining a court action, except with leave of the court. Section 7(2) of the Business Names Act provides that leave shall be granted if the corporation satisfies the court that the failure to register was inadvertent, there is no evidence that the public has been deceived or misled, and at the time of the application to the court, the person is no longer in contravention of the Act or regulation.
The plaintiff has provided evidence that the failure to register the names PCH Homes and CC Green homes was inadvertent. There is no evidence that the public has been deceived or misled. Mr. Collins admitted at his cross-examination that he assumed that PCH Homes was related to the plaintiff, 2280092 Ontario Inc., and to PCH Homes Ltd. Mr. Collins knew that Mr. Heroux, the principal or plaintiff, was the principal of both. CC Green Homes was not used with the Collins. Finally, the plaintiff finally registered the business names and is now in compliance with the Act and its regulations. As a result, leave is granted under s. 7 of the Business Names Act for the plaintiff to maintain or to continue this action.
Whether the counterclaim must be dismissed against any party except 2280092 Ontario Inc.
Under the Construction Act, it is impermissible to add additional parties to a counterclaim. However, as the lien is be vacated and this action is therefore to continue as an ordinary action, this argument is no longer applicable. The plaintiff did not raise other arguments on this point, and the defendants’ pleadings, I note in passing, are otherwise sufficient to engage the other parties.
Consequently, I note, as well, that if I had found that the lien was not invalid, I would then have ordered the counterclaim to be severed and to proceed at the same time as this action, as a separate action, as was done in the decision in Aqua Pools, as this would have been the most efficient way to proceed in those circumstances.
Breach of Trust and Oppression Remedy
No evidence is admissible on a motion brought under Rule 21.01(1)(b) of the Rules of civil Procedure. The purpose of this Rule is to eliminate hopeless claims where there is no viable cause of action. This Rule should be used cautiously and is limited to cases where it is plain and obvious that the claim has no reasonable prospect of success. The facts in the pleadings must be taken as true unless they are patently ridiculous or manifestly incapable of being proven. A novel or a new claim should be struck only when it is clearly unsustainable. None of this is applicable to this case.
In this case, the Statement of Defence and counterclaim detail the claims made by the defendants. For example, I make reference to paragraphs 6, 8, 20, 24, 25, 27, 28, 29, 33, and 34 of the defendants’ Statement of Defence, and to paragraphs 41, 42, 43, 44, 45, 46, 49, 50, 51, 52, 53, 54, 55, 56, and 63 of the counterclaim, all of which provide sufficient particulars of these claims.
Section 8 of the Construction Act is applicable, as the defendants’ pleadings allege that the trust funds were not paid to the appropriate beneficiaries. Third parties may be liable as trustees if they knowingly receive trust property obtained in breach of trust, and these defendants have pled this and have requested a tracing and accounting of trust funds. Liability can be visited on corporate and personal defendants, and I make reference to the decision of Komatsu Canada Ltd. The defendants may very well turn out to be creditors of the plaintiff.
Similarly, for oppression remedy, it is not plain and obvious that these claims have no reasonable prospect of success. The defendants have pled an expectation that the contract would have been respected and have pled that their reasonable expectations in that regard were breached by the conduct of the plaintiff. The plaintiff’s arguments on these points are technical and interesting, and they might eventually be accepted, depending on the evidence at trial, but they do not establish that it is plain and obvious that these claims have no reasonable prospect of success. The trial judge, or if this was a motion for summary judgment, will be better positioned to assess these arguments when he or she has and can consider the evidence relevant to these issues. This cannot be done at a pleadings motion and this part of the cross motion is therefore dismissed.
Consequently, I have prepared an endorsement that will be released today. I will send it to the registrar as soon as we are done. Some items are not yet completed, but it is a brief endorsement that will be published, as stated, today. It just outlines briefly what this motion was about, and for oral reasons the following is ordered. Consequently, for reasons I have just read, an order may issue for the following relief, and that is contained in the endorsement that will be sent to counsel.
(1) An order under s. 47(1) of the Construction Act that the claim for lien and certificates of action registered against the property described in the pleadings, of course counsel will insert the complete description of the property, and registered as instrument numbers — and I will not read them — are invalid, and are to be discharged from title to the property.
(2) This action shall otherwise continue as an ordinary action as opposed to an action brought under the Construction Act. If the parties are unable to agree on a schedule in order to effectively timeline and complete any steps of the main action and counterclaim, then any party may request a case conference for the purpose of establishing timeline.
(3) An order for security for costs shall issue in the appropriate form in the amount of $27,500, requiring the plaintiff to post or pay into court within 45 days from the date of this order as security for the cost of the main action, the plaintiff’s action, either cash, a letter of credit, a bond, or a second priority mortgage over the property at 2 Finrod Court, Ottawa, in a form acceptable to the defendants, and until an acceptable form of security for costs required by this order has been given, the plaintiff may not take any step in the main action, the plaintiff’s action, except an appeal from this order or to defend the counterclaim brought by the defendants.
(4) Under s. 7(2) of the Business Names Act, leave is granted to the plaintiff to maintain this action.
(5) Other than as stated above at paragraph 4, the plaintiff’s cross motion is otherwise dismissed.
(6) As indicated above, an order shall also issue on consent as per paragraphs 3(a) and (b) of the defendant’s reply factum and as per paragraph 1(f) of the defendant’s original factum by the parties filing a consent and draft order for that relief.
And then we are at the item of costs. We will now discuss costs, and I will state my reasons for costs thereafter, so this completes my reasons on the substantive parts of these motions.